The big news for Telstra this week is they have finally signed off on an agreement with NBN Co to sell its existing copper wire network and rent out underground pits. This finally puts to rest the uncertainty around the future of the stock.
This however was not greeted as a positive from all sectors of the market. In fact we saw the price fall straight after the announcement and again on Friday.
Broking houses valuation of Telstra after the announcement ranged from $2.60 to $4.00.
As the price had run up over the months leading up to the announcement I expect the past couple of days has seen some profit taking from the brokers.
True the announcement raised as many questions as it answered and the deal was slightly below expectations, but given the alternative I think that overall this is a positive for the company.
Investors now have a clearer picture of where Telstra is going, we are also now comfortable that the company can continue to pay the nice big fat dividend and over time it will realize some value for the old deteriorating copper wire net work.
I am continuing to hold the stock for the income and will look to start reducing my exposure at higher prices.
With an intrinsic value of $3.60 I expect that long term investors will be rewarded with dividends and a higher exit price.
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